"The market was down because the headlines were negative coming into the U.S.-China negotiations. With Powell not changing the narrative, it makes sense that on further signs of deterioration in trade that the market would sell off," Keith Lerner, chief market strategist at SunTrust Advisory Services in Atlanta was quoted by the Reuters Thomson news agency as saying.

At the close of trading Tuesday the Dow Jones Industrial Average was down 313.98 points, or 1.19%, to 26,164.04.

The Standard and Poor's 500 fell 45.73 points, or 1.56%, to 2,893.06.

The Nasdaq Composite plummeted 132.52 points, or 1.67%, to 7,823.78.

The euro fell despite speculation interest rates will be lowered by the Fed again, possibly as early as this month. The EU unit was last quoted at 1.0957 on Tuesday in New York around the close.

The British pound fell to 1.2221. The Japanese yen advanced a little to 107.05.

The Swiss franc was little changed at 0.9930.

The Canadian dollar eased to 1.3324. The Australian dollar fell to 0.6729 while the New Zealand dollar sank to 0.6295.

In London the FTSE 100 dropped 0.76%. The German Dax closed 1.05% lower, while in Paris, the CAC 40 slumped 1.18%.

Only Asian markets finished in positive territory. The Nikkei 225 in Japan added 212.53 points or 0.99% to 21,587.78 Tuesday.

In China, the Shanghai Composite rose 8.38 points or 0.29% to 2,913.57.

The Hong Kong Sang Seng jumped 85.69 points or 0.33% to 25,906.72.

The Australian All Ordinaries climbed 27.00 points or 0.40% to 6,713.70.